The issue of whether partial payment made by a declarant under the Income Declaration Scheme (IDS) would get forfeited in similar circumstances came up for consideration before the Supreme Court in Hemalatha Gargya Vs. Commissioner of Income Tax, A.P. & Anr. [2002]. While the court held that the time limits prescribed under the IDS were mandatory and could not be extended on any equitable consideration, it directed the refund or adjustment of the amount deposited under the Scheme.

“Petitioner’s Income Declaration Scheme declaration found incomplete due to non-payment of full calculated amount despite depositing some undisclosed income”

The Andhra Pradesh High Court in Patchala Seetharamaiah Vs. Commissioner of Income-tax and Anr. [1999] held that retention of any amount paid under the Scheme would be impermissible under Article 265 of the Constitution of India if the amounts paid under the Scheme in terms of the declaration were held to be non-est as per the Scheme.

In the present case, the petitioner had not paid the entire amount in terms of the revised Form-3 by the last date specified, i.e., 30th October 2021. However, the petitioner contended that the amount of Rs. 3,48,752/- deposited by them and lying with the respondents in terms of the IDS, if adjusted against the revised Form-3 under the Scheme of the Direct Tax Vivad Se Vishwas Act, would render the petitioner’s claim valid.

The court held that the amount deposited by the petitioner under the IDS could not have been forfeited and neither refunded nor adjusted. It was a simple case where the money lying in the corpus of the revenue had to be adjusted by way of a mathematical exercise and the benefit accorded to the petitioner under the Direct Tax Vivad Se Vishwas Act. Thus, the failure on the part of the petitioner to pay the tax in its entirety in respect of the declaration made under section 183 would be deemed to have never been made under the IDS.

This petition is granted, and the respondents are instructed to issue a new Form-3, taking into account the amount paid by the petitioner under the IDS. Any remaining balance shall be refunded to the petitioner.

-Navneet Shukla